Since the Middle Ages, gold and silver have been used for currency. During the 20th century, changes in price occurred when the gold standard was repealed and the U.S. dollar was no longer valued in gold. At this time, inflation, exchange rates and market confidence influenced the price of gold.
Gold became the common form of currency in the early 1800s when European wars depleted silver resources. In 1900, the United States implemented the gold standard for all forms of U.S currency, equating one U.S. dollar with the historic value of gold at the time, $20.67 per ounce. At the same time, the United States implemented a fixed exchange rate with other paper currencies, and gold was priced in U.S. dollars.
In the late 1960s, global demand for gold increased. In the 1970s, the United States attempted to equate the dollar with rising costs per ounce of gold, ranging from $35 to $42.22, but ultimately repealed the gold standard. Paper currency was no longer backed by gold, and more dollars were in supply, leading to inflation. The value of the U.S. currency decreased, and investors converted dollars into gold, increasing demand and price.
As demonstrated during this period, gold typically performs well when investors lack confidence in the value of paper currencies. Other factors influencing price are wars and lack of confidence in financial markets.